This article examines governance and territorial transformation in Lago Agrio, an Amazonian frontier city shaped by processes of forced migration and political decentralization. Through a comparative qualitative methodology, it analyzes how local governance unfolds within a framework of functional centralism, wherein responsibilities are delegated without the transfer of substantive autonomy. Integrating legal, spatial planning, and community perspectives, the study applies a governance matrix to twelve clusters of informal urbanization. The cases of ACER and Nuevo Recinto serve to illustrate contrasting governance outcomes. The findings reveal that in Lago Agrio, institutions depend primarily on negotiation, rather than autonomous municipal authority. ACER has achieved partial formalization as a peri-urban settlement through mechanisms of collective land tenure and cohesive grassroots organization. Conversely, Nuevo Recinto, established on private land, remains marginal to formal planning and redistributive frameworks. These divergences underscore a model of governance rooted in relational proximity and external alliances. The study concludes that hybrid urban–rural forms emerge from such negotiated arrangements, sustaining Lago Agrio’s character as a city of refuge. It calls for policy frameworks that integrate land rights, livelihood strategies, and public investment to strengthen inclusive urban governance in peripheral and borderland contexts.